Meridian Mining — Interim / Quarterly Report 2021

Nov 26, 2021

MERIDIAN MINING

MERIDIAN MINING UK Societas
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in United States dollars)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(UNAUDITED)

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NOTICE OF NO AUDITOR REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the condensed consolidated interim financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements.

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditor.

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MERIDIAN MINING UK Societas
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(Expressed in United States dollars)
(Unaudited)

	As at September 30, 2021	As at December 31, 2020
ASSETS
Current
Cash	$ 2,747,758	$ 4,516,136
Prepaid expenses and other assets (Note 4)	166,557	183,108
Inventory (Note 5)	10,536	11,010
	2,924,851	4,710,254
Property, plant and equipment (Note 6)	575,904	220,701
Exploration and evaluation assets (Note 7)	5,816,484	6,008,048
Total assets	$ 9,317,239	$ 10,939,003
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities (Note 8)	$ 871,271	$ 510,563
Taxes and fees payable (Note 9)	1,451,371	415,467
Provisions (Note 10)	283,668	422,950
	2,606,310	1,348,980
Provisions (Note 10)	87,966	157,418
Taxes and fees payable (Note 9)	111,636	1,177,192
Warrant Liability (Note 12)	12,260,592	5,031,394
	15,066,504	7,714,984
Equity (Deficit)
Share capital (Note 12)	1,577,217	1,184,781
Share premium (Note 12)	25,965,065	12,021,458
Reserves (Note 12)	66,640,975	66,427,924
Deficit	(99,932,522)	(76,410,144)
Total equity (Deficit)	(5,479,265)	3,224,019
Total liabilities and equity	$ 9,317,239	$ 10,939,003

Nature of business and going concern (Note 1)
Commitments and contingencies (Note 20)
Subsequent events (Note 21)

On behalf of the Board on November 25, 2021:

“Gilbert Clark” Director “Charles Riopel” Director

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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MERIDIAN MINING UK Societas
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND OTHER COMPREHENSIVE LOSS
(Expressed in United States dollars)
(Unaudited)

	Three months ended September 30		Nine months ended September 30
	2021	2020
(Restated (Note 22))	2021	2020
(Restated (Note 22))
Revenues	$ -	$ -	$ -	$ 245,346
Cost of sales (Note 14)	-	-	-	(257,701)
	-	-	-	(12,355)
Operating expenses
Exploration and evaluation expenses (Note 15)	1,165,066	91,644	2,541,443	333,363
General and administration expenses (Note 16)	540,941	347,192	1,351,907	978,216
Community relations	-	-	-	883
Professional fees	57,060	46,193	405,040	370,736
Re-commissioning and standby costs	-	-	-	-
Care and maintenance expenses	11,504	73,783	63,397	286,509
Gain on sale of property, plant and equipment	-	(35,789)	-	(220,338)
Share-based payments (Note 12)	-	-	600,824	49,266
Depreciation	14,850	12,344	31,219	50,803
Total operating expenses	(1,789,421)	(535,367)	(4,993,830)	(1,849,438)
Loss from operations	(1,789,421)	(535,367)	(4,993,830)	(1,861,793)
Finance items
Mark-to-market revaluation of warrants (Note 12)	(5,019,781)	(6,565,519)	(18,583,588)	(6,565,519)
Loss on extinguishment of debt (Note 11)	-	(200,100)	-	(200,100)
Gain on financial liability at FVTPL (Note 11)	-	235,777	-	235,777
Finance income	7,058	31,047	8,858	31,085
Finance expense (Note 11)	(15,138)	(63,396)	(22,160)	(563,100)
Foreign exchange	9,970	(501,892)	68,342	(558,556)
Total finance expenses	(5,017,891)	(7,064,083)	(18,528,548)	(7,620,413)
Loss for the period	(6,807,312)	(7,599,450)	(23,522,378)	(9,482,206)
Other comprehensive loss
Items that may be reclassified to loss
Foreign currency translation	(522,109)	(215,567)	(283,548)	(1,970,427)
Other comprehensive loss, net of taxes	$ (7,329,421)	$ (7,815,017)	$ (23,805,926)	$ (11,452,633)
Basic and diluted loss per common share	$ (0.06)	$ (0.08)	$ (0.20)	$ (0.08)
Weighted average number of basic and diluted shares outstanding	128,285,467	96,648,802	118,081,034	141,022,616

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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MERIDIAN MININGUK Societas
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Expressed in United States dollars)
(Unaudited)

Nine months ended September 30
	2021	2020
(Restated (Note 22))
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period	$ (23,522,378)	$ (9,482,206)
Items not affecting cash:
Accrued finance expense	-	473,189
Depreciation	31,219	50,803
Mark-to-market revaluation of warrants	18,583,588	6,565,519
Gain on sale of property, plant and equipment	-	(220,338)
Provisions	33,978	(6,278)
Unrealized foreign exchange	(68,342)	552,202
Share-based payments	600,824	49,266
Changes in tax credits	-	108,344
Changes in tax and fees payable (Note 9)	39,782	206,018
Loss on extinguishment of debt (Note 9)	-	200,100
Unrealized gain on financial liability (Note 9)	-	(235,779)
Changes in non-cash working capital items:
Accounts receivable	-	822,246
Prepaid expenses and other assets	(7,999)	47,460
Inventory	-	239,757
Provisions	(212,472)	-
Accounts payable and accrued liabilities	299,267	(843,493)
Net cash used in operating activities	(4,222,532)	(1,473,190)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment	(402,859)	-
Exploration and evaluation asset acquisition	(51,792)	(25,000)
Proceeds from sale of property, plant and equipment	-	285,341
Net cash provided by (used in) investing activities	(454,651)	260,341
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from private placement financing, net of costs	-	2,534,135
Proceeds from the exercise of options	2,059	36,574
Proceeds from the exercise of warrants and agent’s compensation options exercise	2,875,370	-
Net cash provided by financing activities	2,877,429	2,570,709
Effect of foreign exchange on cash	31,376	(110,176)
Net change in cash	(1,768,378)	1,247,686
Cash, beginning of the period	4,516,136	530,322
Cash, end of the period	$ 2,747,758	$ 1,778,006

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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MERIDIAN MINING UK Societas
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(Expressed in United States dollars)
(Unaudited)

	Share Capital			Reserves
	Shares	Share Capital	Share Premium	Reserves	Share based payments	Warrant reserve	Other reserves	Accumulated other comprehensive loss	Deficit	Total Equity
Balance, January 1, 2020	163,822,421	$1,775,220	$58,493,031	$462,185	$2,089,882	$13,447	–	$(12,025,433)	$(68,877,884)	$(18,069,552)
Share-based payments	–	–	–	–	49,266	–	–	–	–	49,266
Share issued on private placement	46,766,666	533,853	1,327,378	–	–	–	–	–	–	1,861,231
Share issuance costs	–	–	(160,658)	–	–	108,523	–	–	–	(52,135)
Exercise of Options	700,000	8,110	49,091	–	(20,627)	–	–	–	–	36,574
Debt settlement transactions, SGRFIV (Note 11 and 12)	5,958,540	67,825	1,380,873	–	–	–	21,572,739	–	–	23,021,437
Debt settlement transactions, TSG (Note 11 and 12)	5,910,602	67,280	1,369,763	–	–	–	–	–	–	1,437,043
Share surrender (note 12)	(141,011,304)	(1,531,649)	(53,013,749)	–	–	–	54,545,398	–	–	–
Comprehensive loss for the period (Restated (Note 22))	–	–	–	–	–	–	–	(1,970,427)	(9,482,206)	(11,452,633)
Balance, September 30, 2020	82,146,925	920,639	9,445,729	462,185	2,118,521	121,970	76,118,137	(13,995,860)	(78,360,090)	(3,168,769)
Balance, January 1, 2021	103,788,425	1,184,781	12,021,458	462,185	2,118,521	159,449	77,273,171	(13,585,402)	(76,410,144)	3,224,019
Share-based payments	–	–	–	–	600,824	–	–	–	–	600,824
Exercise of stock options	37,287	472	2,685	–	(1,098)	–	–	–	–	2,059
Exercise of warrants	29,688,065	365,215	13,708,981	–	–	–	–	–	–	14,074,196
Exercise of agent’s compensation options	2,229,682	26,749	231,942	–	–	(103,127)	–	–	–	155,564
Comprehensive loss for the period	–	–	–	–	–	–	–	(283,548)	(23,522,378)	(23,805,926)
Balance, September 30, 2021	135,743,459	$1,577,217	$25,965,066	$462,185	$2,718,247	$56,322	$77,273,171	$(13,868,950)	$(99,932,522)	$(5,749,266)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

1. NATURE OF BUSINESS AND GOING CONCERN

Meridian Mining UK Societas, formerly Meridian Mining S.E., (the “Company” or “Meridian”) was formed in Amsterdam, Netherlands on December 16, 2013. Effective August 15, 2017 the Company transferred its official seat from the Netherlands to London, United Kingdom. The Company’s shares are listed on the TSX Venture Exchange (“TSX-V”) under the symbol MNO. The Company is currently engaged in the exploration, development of mineral deposits in Brazil, through its subsidiaries, Meridian Mineração Jaburi S.A. (“Jaburi”) and Rio Cabaçal Mineração Ltda. On December 31, 2020, the Company was converted under Articles AA1 and AAA1 of the EC Regulation on the European Public Limited-Liability company (Amended Etc.) (Eu Exit) Regulations 2018 to a United Kingdom Societas under the name of Meridian Mining UK Societas. The Company’s head office is located at 6th Floor, 65 Gresham Street, London, EC2V 7NQ, United Kingdom.

Going Concern

These condensed consolidated interim financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business as they come due into the foreseeable future. The Company incurred a loss of $23,522,378 during the nine-month period ended September 30, 2021 (2020 - $9,482,206). The Company has a working capital of $318,541 at September 30, 2021 (December 31, 2020 - $3,361,274).

To continue as a going concern, the Company will need to secure new funding. The ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions and exploration successes. There can be no assurance that these initiatives will be successful, or sufficient financing, will be available. These material uncertainties cast significant doubt as to the ability of the Company to meet its business plan and obligations as they come due and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern.

These financial statements do not include adjustments to the recoverability and classifications of recorded assets and liabilities and related expenses that might be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.

The recoverability of the amounts shown for mineral properties is dependent on the existence and economic extraction of resources, the capacity to obtain financing to complete the development of such resources, the ability to obtain the necessary licenses and permits and meet the Company’s obligations under various agreements, stability or increases in future commodity prices, and the success of future operations or dispositions of the mineral properties.

1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance and basis of presentation

These condensed consolidated interim financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). The accounting policies applied in these condensed interim consolidated financial statements are consistent with those disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2020.

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

Basis of presentation

These unaudited condensed consolidated interim financial statements have been prepared on a historical cost basis except for certain financial instruments classified as financial instruments at fair value through profit or loss, which are stated at fair value. The financial statements of the Company are presented in United States dollars, which is the functional currency of the Company.

Principles of consolidation

The condensed consolidated interim financial statements incorporate the assets and liabilities and revenues and expenses of the Company's subsidiaries. Subsidiaries are all entities controlled by the Company. Control exists when the Company is exposed, or has rights, to variable returns from its involvement with an investee and has the ability to affect those returns through its power over the investee. Subsidiaries are included in the condensed consolidated interim financial statements from the date control is obtained until the date control ceases. All intercompany balances, transactions, income, expenses, profits and losses, including unrealized gains and losses have been eliminated on consolidation.

These condensed consolidated interim financial statements include the following 100% held entities as September 30, 2021 and December 31, 2020:

Name of subsidiary:	Jurisdiction of Incorporation	Functional Currency
Ferrometals Management Services Canada Inc	Canada	USD
Meridian Mineração Jaburi S.A.	Brazil	BRL
Cancana Resources Corp (“Cancana”)	Canada	CAD
Rio Cabaçal Internacional Ltda¹	Brazil	BRL
Rio Cabaçal Mineração Ltda²	Brazil	BRL

¹Previously Cabaçal Internacional Ltda.
²Previously Cabaçal Mineração Ltda.

Accounting policies of subsidiaries are updated where necessary to ensure consistency with the policies adopted by the consolidated group. Acquisitions of subsidiaries under common control before and after the transaction are recorded at historical carrying value. Subsidiaries under common control are consolidated from the date of acquisition by the ultimate controlling entity.

3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of these condensed consolidated interim financial statements requires management to make judgments and estimates and form assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates. Actual outcomes may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Certain estimates, such as those related to the recoverability of property, plant and equipment, and exploration and evaluation assets, deferred tax assets and liabilities, depreciation and remaining useful life of assets, and disclosure of contingencies depend on subjective or complex judgments about matters that may be uncertain. Changes in those estimates could materially impact these condensed consolidated interim financial statements.

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MERIDIAN MINING UK Societas
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in United States dollars)
(Unaudited)

Material sources of estimation uncertainty include:

Income taxes

In assessing the probability of realizing income tax assets recognized, management makes estimates related to expectations of future taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified. Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that materially affect the amounts of income tax assets recognized. At the end of each reporting period, the Company reassesses unrecognized income tax assets.

The Company’s operations involve dealing with uncertainties and judgments in the application of complex tax regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with tax authorities in various jurisdictions and resolution of disputes arising from tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues based on its estimate of whether, and the extent to which, additional taxes will be due. The Company adjusts these reserves in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the tax liabilities. If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If the estimate of tax liabilities proves to be greater than the ultimate assessment, a tax benefit would result.

Impairment of property, plant and equipment

The Company considers both external and internal sources of information in assessing whether there are any indications that its cash generating unit (“CGU”) including property, plant and equipment is impaired. External sources of information the Company considers include changes in the market, and the economic and legal environment in which the Company operates and affect the recoverable amount of mining interests. Internal sources of information the Company considers include the manner in which mining properties, plant, and equipment are being used or are expected to be used and indications of economic performance of the assets.

In determining the recoverable amounts of the Company’s property, plant and equipment, the Company makes estimates of the discounted future after-tax cash flows expected to be derived from the Company’s mining properties, costs to sell the assets and the appropriate discount rate. The projected cash flows are significantly affected by changes in assumptions related to future metal prices, changes in the amount of future production, and exploration potential, production cost estimates, future capital expenditures, discount rates and exchange rates.

Access to estimated future production and exploration potential of the Company’s property, plant and equipment is a key assumption in determining their recoverable amounts. The ability to maintain existing or obtain necessary mining concessions, surface rights title, and water concessions is integral to the access of the production areas and exploration potential.

If the Company determines there has been an impairment because its prior estimates of discounted future cash flows have proven to be inaccurate, due to reductions in manganese prices or demand, increases in the costs of production, reductions in the amounts of production, or other factors, the Company would be required to write-down the recorded value of its property, plant and equipment or goodwill in profit and loss.

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MERIDIAN MINING UK Societas
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in United States dollars)
(Unaudited)

Share based compensation and mark-to-market revaluation of warrants and embedded derivatives

The Company utilizes the Black-Scholes Option Pricing Model (“Black-Scholes”) to estimate the fair value of stock options granted to directors, officers, employees, and consultants and for the mark-to-market revaluation of share purchase warrants. The use of Black-Scholes requires management to make various estimates and assumptions that impact the value assigned to the stock options including the forecast future volatility of the stock price, the risk-free interest rate, dividend yield and the expected life of the stock options.

The Company’s financial liability measured at fair value through profit and loss (“FVTPL”) requires estimates of valuation inputs including extended hold period discounts, risk-free interest rates and the probability of and the timing of future financing transactions.

Any changes in these assumptions could have a material impact on the share-based compensation calculation value and mark-to-market valuation changes of derivatives and financial liabilities measured at FVTPL. The most significant estimates relate to volatility, hold period discounts and the assessment of the probability of future financing targets being met. Expected future volatility can be difficult to estimate as the Company has had limited history and historical volatility is not necessarily indicative of future volatility.

Critical management judgments:

Mineral Production, depreciation and depletion

The Company’s mine assets are depleted and amortized on a units of production basis, using the expected amount of future production. Changes to these estimates, which can be significant, could be caused by a variety of factors, including future production differing from current forecasts, expansion of mineral resources through exploration activities, difference between estimated and actual cost of mining and other factors impacting production or the expected life of mine assets. The Company does not have a National Instrument 43-101 compliant resource estimate and accordingly uses expected forecasts based on available geological and technical data as a basis for the expected amount of production.

Recoverability of exploration and evaluation assets

The Company capitalizes the acquisition costs related to its exploration and evaluation assets. This policy requires management to make certain judgments about future events and circumstances. Any such judgments may change as new information becomes available. If, after having capitalized the costs, a judgment is made that recovery of the costs is unlikely, the relevant capitalized amount will be written off to profit and loss.

The recoverability of amounts shown for exploration and evaluation assets is dependent on the existence of economically recoverable reserves, the ability to obtain financing to complete the development of such reserves and meet obligations under various agreements, and the success of future operations or dispositions. If a project does not prove viable, all unrecoverable costs associated with the project net of any related existing impairment provisions are written down to its recoverable amount.

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MERIDIAN MINING UK Societas
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in United States dollars)
(Unaudited)

1. PREPAID EXPENSES AND OTHER ASSETS

	September 30, 2021	December 31, 2020
Current:
Tax credits	$ 18,497	$ 19,329
Tax recovery	-	24,000
Prepaid expenses and other advances	148,060	139,779
Total	$ 166,557	$ 183,108

The Company is required to pay certain taxes in Brazil that are based on purchases of consumables and property, plant and equipment. These taxes credits are recoverable from the Brazilian tax authorities through various methods, including as a cash refund or as a credit against current taxes payable.

1. INVENTORY

	September 30, 2021	December 31, 2020
Stockpiled ore	$ -	$ -
Consumables and stores	10,536	11,010
Total	$ 10,536	$ 11,010

During the nine-month period ended September 30, 2021, $nil (September 30, 2020 - $189,005) of costs were expensed that were directly attributable to the costs incurred during the production of inventory.

1. PROPERTY, PLANT AND EQUIPMENT

Cost:		Land and buildings	Vehicles, machinery and equipment	Office furniture and other	Total
Balance, January 1, 2020	$	93,848	$ 1,238,278	$ 188,709	$ 1,520,835
Disposals		-	(600,345)	(68,038)	(668,383)
Currency adjustment	$	(21,182)	$ (269,233)	(41,431)	(331,846)
Balance, December 31, 2020	$	72,666	$ 368,700	$ 79,240	$ 520,606
Additions		-	385,915	16,944	402,859
Currency adjustment		(3,130)	(23,079)	(3,729)	(29,938)
Balance, September 30, 2021	$	69,537	$ 731,536	$ 92,455	$ 893,527
Accumulated depreciation:		Land and buildings	Vehicles, machinery and equipment	Office furniture and other	Total
---	---	---	---	---	---
Balance, January 1, 2020	$	-	$(934,821)	$(130,949)	$(1,065,770)
Additions		-	(45,706)	(12,634)	(58,340)
Disposals		-	545,631	47,149	592,780
Currency adjustment		-	202,458	28,967	231,425
Balance, December 31, 2020	$	-	$(232,438)	$(67,467)	$(299,905)
Additions		-	(27,803)	(3,416)	(31,219)
Currency adjustment		-	10,531	2,970	13,501
Balance, September 30, 2021	$	-	$(249,710)	$(67,913)	$(317,625)

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

Net book value:	Land and buildings	Vehicles, machinery and equipment	Office furniture and other	Total
December 31, 2020	$ 72,666	$ 136,262	$ 11,773	$ 220,701
September 30, 2021	$ 69,536	$ 481,826	$ 24,542	$ 575,904

7. EXPLORATION AND EVALUATION ASSETS

Summary of exploration and evaluation assets:

Balance as at January 1, 2020	$ 7,700,032
Option payment – Cabaçal Project	25,000
Foreign currency adjustment	(1,716,984)
Balance as at December 31, 2020	6,008,048
Additions – acquisition of new areas	51,792
Foreign currency adjustment	(243,356)
Balance as at September 30, 2021	$ 5,816,484

Title to mineral property interests

Title to mineral property interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral claims. Title to mineral properties is also subject to the laws and regulations in Brazil, which can be subject to change and may impact the Company's title to its mineral properties. The Company has investigated title to all of its subsidiaries' mineral properties and, to the best of its knowledge, title to all of its subsidiaries' interests are in good standing. However, this should not be construed as a guarantee of title. The concessions may be subject to prior claims, agreements or transfers and rights of ownership may be affected by undetected defects.

Espigão Project, Rondônia

In connection with the loan settlements described in Note 10, the Company issued a net smelter return royalty to SGRFIV, as follows:

• 3% on Espigão polymetallic;
• 3% Mirante da Serra manganese;
• 3% Ariquemes tin; and
• 100% of the royalty on each project can be bought back for $2,000,000 for each project or $6,000,000 for all 3 projects. The Company has determined that there is currently no value related to this buy-back feature.

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

Mirante da Serra, Rondônia

On July 24, 2019 the Company entered into an option agreement to acquire a 100-per-cent interest in the Mirante da Serra manganese project, in Rondônia, Brazil. Following a sequential process related to project and administrative milestone achievements, the Company may at its election, acquire the project for a cumulative consideration of 1,140,000 Brazilian real (approximately $ 230,000 (U.S.)). The Company is required to make staged payments as follows:

• 40,000 Brazilian reals upon signing (paid – $10,296);
• 75,000 Brazilian reals upon approval of the final report by the Brazilian National Mining Agency (“ANM”) and title transfer to Meridian (paid on October 14, 2021);
• 125,000 Brazilian reals on the Meridian board of directors' approval of a positive PEA (Plano de Aproveitamento Econômico (“PAE”) or Economic Mining Plan);
• 150,000 Brazilian reals following the ANM (Agência Nacional de Mineração) approval of PAE;
• 250,000 Brazilian real one-year anniversary of ANM approval;
• 500,000 Brazilian reals upon grant and publication of a valid mining licence (Lavra);

The project is subject to a 0.5% NSR, which the Company may purchase back for one million Brazilian real.

Cabaçal Project, Mato Grosso

During the year ended December 31, 2020 the Company entered into a definitive Purchase Agreement to acquire a 100% beneficial interest in the Cabaçal Copper-Gold Project (“Cabaçal”) in the state of Mato Grosso, Brazil, for a total consideration of $8,750,000 plus, at the option of the vendors, 4,500,000 Meridian shares or CAD$1,350,000, from two private Brazilian companies, Prometálica Mineração Ltda. and IMS Engenharia Mineral Ltda (the “Vendors”). On February 9, 2021 the Company changed the terms of the second payment and assigned the Purchase Agreement related to Cabaçal project to its subsidiary Rio Cabaçal Mineração Ltda. On October 5, 2021, the Company changed the terms of the second payment. The Company is required to make staged payments based on milestones achieved as follows:

• $25,000 payable within 5 days of the execution of the option agreement; (paid)
• $275,000 payable by October 15, 2021, as the transfers of the mineral rights to Rio Cabaçal Mineração Ltda were filed with ANM (paid on October 14, 2021);
• $1,750,000 payable within 12 months of the second payment provided completion of successful drilling program and historical geophysics database validation;
• 1,000,000 common shares in the capital of the Company or CAD$300,000, at the option of the Vendors, subject to completion of technical report on the estimate of the resource in accordance with National Instrument 43-101;
• $1,850,000 plus, at the option of the vendors, 1,500,000 common shares in the capital of the Company or CAD$450,000, within 9 months of the fourth payment and subject to the successful completion of the positive economic feasibility study;
• $2,250,000 payable plus, at the option of the vendors, 2,500,000 common shares in the capital of the Company or CAD$600,000, up to 30 days after the Installation License (“LI”) of the Cabaçal Project plant is issued by the competent authorities; and
• $2,600,000 payable within 45 days after the signature by the Company of the definitive financing contracts for the construction of the Cabaçal Project plant.

There is a historic 1.5% NSR associated with the Santa Helena project, which is part of Cabaçal. Cabaçal is located within the buffer zone of Brazil’s frontier and that the Company will comply with all applicable Brazilian Laws. The buffer zone is a political protection zone and not an economic exclusion zone. The term of the Agreement gives the Company the option, under certain conditions, to return the mineral rights to the Vendors on a “as is” basis, without any obligation to making any outstanding payments and to complying with other obligations.

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	September 30, 2021	December 31, 2020
Current:
Trade payables	$ 660,701	$ 458,165
Payroll liabilities	186,568	52,398
Other liabilities	24,040	-
Total	$ 871,271	$ 510,563

9. TAXES AND FEES PAYABLE

	September 30, 2021	December 31, 2020
Current:
Taxes and fees payable (i)	75,654	79,059
Withholding taxes and other taxes related to debt restructuring (ii)	1,323,310	292,532
Other	52,607	43,876
Total	$ 1,451,371	$ 415,467
Non-Current:
Taxes and fees payable (i)	111,636	177,046
Withholding taxes and other taxes related to debt restructuring (ii)	-	1,000,146
Total	$ 111,636	$ 1,177,192

(i) Restructuring of Brazilian taxes and fees liabilities

During the year ended December 31, 2020, the Company enrolled in an instalment payment program on certain unpaid taxes and fees related to the year ended December 31, 2019. Under the program the Company will pay the outstanding taxes and fees, plus accrued penalties and interests, in equal instalments over a period of 36 to 60 months.

The terms of each instalment program can be summarized as follow:

a) Brazilian social security taxes. The total taxes payable of $139,516 will be repaid in equal monthly instalments over 41 months, adjusted for inflation.
b) Brazilian ANM fees. The total fees payable of $47,773 will be repaid in equal monthly instalments over 16 months, adjusted for inflation.

As a result, the Company reclassified as long-term liabilities the amount of $111,636.

(ii) Withholding taxes and other taxes related to debt facilities

Certain taxes totalling $1,323,310 (December 31, 2020 - $1,292,678), including $nil (December 31, 2020 - $1,000,146) as long-term liability, were accrued in connection with the debt restructuring transactions described in Note 11.

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MERIDIAN MINING UK Societas
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in United States dollars)
(Unaudited)

1. PROVISIONS

	Environmental provision (i)	Other provisions (ii)	Total
Balance, January 1, 2020	$ 536,446	$ 375,282	$ 911,728
Spent during the period	(196,048)	-	(196,048)
Accretion	10,341	-	10,341
Additions (reversals) during the year	99,046	(60,842)	38,204
Foreign currency adjustment	(119,596)	(64,261)	(183,857)
Balance, December 31, 2020	$ 330,189	$ 250,179	$ 580,368
Spent during the period	(215,577)	(5,630)	(221,207)
Accretion	6,956	-	6,956
Additions during the year	-	27,022	27,022
Foreign currency adjustment	(10,331)	(11,174)	(21,505)
Balance, September 30, 2021	$ 111,237	$ 260,397	$ 371,634
Represented by:
Long-term portion	$ 87,966	$ -	$ 87,966
Current portion	$ 23,271	$ 260,397	$ 283,668

(i) Environmental provision

Pursuant to Jaburi’s operations in Brazil, the Company is required to rehabilitate its plant and colluvial mining sites, as well as remove all plant and equipment. A provision has been recognized for the requirements to rehabilitate these sites environmentally and decommission the plant and equipment. Environmental liabilities required to rehabilitate sites are considered short term in nature and is included in production costs in the period recognized. Long term environmental liabilities related to decommissioning the plants are recorded at the present value of the estimated costs, assuming risk-free discount rates of 6.5% (2019 – 6,5%) and are expected to be incurred in 2022.

(ii) Other provisions

Various legal and regulatory matters are outstanding from time to time due to the nature of the Company’s operations. In the event that management’s estimate of the future resolution of these matters changes, the Company will recognize the effects of the changes in its condensed consolidated interim financial statements on the date such charges occur. As at September 30, 2021, the Company has recognized a provision of $260,397 (December 31, 2020 - $250,179) representing management’s best estimates of expenditures required to settle present obligations. The ultimate outcome or actual cost of settlement may vary materially from management estimates due to the inherent uncertainty regarding the Company’s estimates.

1. LOANS PAYABLES

	September 30, 2021	December 31, 2020
Balance, beginning of period	$ -	$ 24,786,099
Interest expense	-	473,189
Debt settlement (a)	-	(25,259,288)
Balance, end of period	$ -	$ -

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

a. Standstill Agreement and Debt Settlements:

In March 2020, the Company signed amendment and stand-still agreements with Sentient Global Resources Fund IV L.P. ("SGRFIV") and The Sentient Group Limited ("TSG") extending the maturity date of all loans from March 31, 2020 to July 30, 2020 and reducing the interest rates to 0% effective April 1, 2020.

Subsequent to entering into the amendment and stand-still agreements, the Company completed various restructuring transactions with SGRFIV and TSG resulting in the settlement of the amounts outstanding. Each of these restructuring transactions is considered to be a substantial modification of the previous debt agreement and therefore the prior carrying amounts have been settled and the consideration which was issued by the Company has been accounted for at fair value, with all transaction costs being expensed as incurred.

Debt settlement gains related to the restructuring transactions with SGRFIV have been recognized as a capital contribution in equity as SGRFIV owned in excess of 87% of the Company's voting common shares at the time of the restructuring transactions and therefore was considered to be acting in the interests of a shareholder rather than a creditor. Debt settlement loss related to the restructuring transaction with TSG has been recognized in the consolidated statement of loss and other comprehensive loss as TSG was considered to be acting in the interests of a creditor. TSG was a third party when TSG entered into the restructuring transaction with the Company.

The following is a summary of the restructuring transactions at settlement dates:

	Carrying Value of Loan Extinguished	Form of consideration given	Valuation of consideration	Equity – Other reserves	Gain (loss) on Settlement
SGRFIV:
(i)	$ 10,861,715	Consolidated facility agreement	$ 1,123,119	$ 9,738,596	$ -
(ii)	10,500,000	Common shares	1,448,698	9,051,302	-
(iii)	3,166,027	Net smelter royalties	-	3,166,027	-
	24,527,742		2,571,817	21,955,925	-
TSG
(iv)	1,192,406	Common shares	1,437,043	-	(244,636)

(i) Consolidated Facility Agreement with SGRFIV

Effective on the closing of the July 15, 2020 private placement, the Company replaced debt of $10,343,397 in exchange for a non-interest bearing loan facility of CAD $14,674,177 maturing on March 31, 2022 ("Consolidated Facility"). Any outstanding balance of the loan facility at maturity will be converted into common shares of Meridian at a conversion rate of CAD $2.50 per common share. The Company can elect to settle the loan facility in cash at any time without premium and has the option to convert the loan to common shares at the same conversion rate prior to maturity if or when the Company meets a financing target of CAD $7,093,500 (this condition was met upon completion of the December 21, 2020 private placement (Note 12)). The Company had also agreed to assume SGRFIV's future withholding tax obligation owing when the interest portion of the debt is ultimately settled with SGRFIV by Meridian (Refer to note 22). The Consolidated Facility Agreement is secured against certain intercompany loans between Meridian and its subsidiary Jaburi and all the shares of Jaburi.

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

The Consolidated Facility was determined to be a financial liability containing an embedded derivative asset related to the Company’s contingent share conversion option. The Company elected to measure the entire hybrid instrument at fair value through profit and loss. On initial recognition, the Consolidated Facility was recognized at fair value of $1,123,119. The difference between the carrying amount of the settled debt ($10,861,715) and the fair value of the loan facility was $9,738,596 and it was recognized as a capital contribution to other reserves. The fair value of the estimated withholding tax obligation related to the Consolidated Facility is $1,002,612 (December 31, 2020 – $1,000,146).

During the year ended December 31, 2020, the Company completed two non-brokered private placements with total proceeds of CAD $7,822,800. As result, the Consolidated Facility’s financing target of CAD $7,093,500 was met on the closing date of the December 21, 2020 financing (Note 12) resulting in the Company now having the option to settle the outstanding Consolidated Facility with a fixed number of common shares (5,869,670 common shares) at any time through to maturity. Upon effectiveness of the issuer conversion provision, the Company had a substantive right to settle the liability with their own shares and therefore the instrument was reclassified to equity. The fair value of the Consolidated Facility liability of $771,849 on December 21, 2020 was reclassified to other reserves as an equity instrument, resulting in no gain or loss on extinguishment.

The Company recorded a gain of $351,270 due to change in the fair value of the loan facility, measured at FVTPL, through to its reclassification to equity on December 21, 2020.

(ii) Debt Conversion Agreement with SGRFIV

The Company issued 5,958,540 common shares on July 16, 2020 to SGRFIV to settle debt of $10,500,000. The transaction was accounted for as a debt extinguishment and the Company’s common shares were valued using the closing trading price of Meridian’s common shares on July 16, 2020, the date of debt extinguishment. The difference between the fair value of consideration and the carrying amount of the debt extinguished has been recognized as a capital contribution to other reserves, totalling $9,051,302.

(iii) Royalty Purchase and Debt Settlement Agreement and Net Smelter Royalty Agreement between Cancana and SGRFIV

Cancana issued to SGRFIV a 2% net smelter returns royalty (“Royalty”) to settle the debt of $3,166,027. The effective date of the extinguishment was June 2, 2020, the date Cancana received approval from TSX-V. The Company had also agreed to assume SGRFIV’s future withholding tax obligation owing when the interest portion of the obligation is paid to SGRFIV by Cancana (Refer to Note 22). The fair value of the Royalty valued at inception was $nil and the difference from the carrying amount of the debt extinguished was recognized as a capital contribution to other reserves, totalling $3,166,027. As at March 31, 2021, the fair value royalty obligation was estimated to be $nil (December 31, 2020 - $nil). The fair value of the estimated withholding tax payable is $181,717 (December 31, 2020 - $176,783).

In June 2020, the Company agreed to increase the Royalty from 2% to 3%. TSX-V approval for the increase was received on September 22, 2020.

The 3% net smelter returns royalty is over the following projects:

• 3% on Espigão polymetallic;
• 3% Mirante da Serra manganese;
• 3% Ariquemes tin; and
• 100% of the royalty on each project can be bought back for $2,000,000 for each project or $6,000,000 for all 3 projects. The Company has determined that there is currently no value related to this buy-back feature.

Certain conditions and restrictions apply to be followed by Jaburi and Cancana regarding the title maintenance and assignment of the projects contemplated in the Royalty Agreement.

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

(iv) Debt Conversion Agreement with TSG

The Company issued 5,910,602 common shares on July 16, 2020, at a conversion price of CAD $0.30 per common share, to The Sentient Group’s nominees to settle debt of $1,249,863. The Company had also agreed to assume TSG’s future withholding tax obligation owing when the interest portion of the obligation is paid to TSG by Meridian (refer to Note 22). The transaction was accounted for as a debt extinguishment, resulting in a loss on extinguishment of $244,636. The fair value of the estimated withholding tax payable is $57,457 (December 31, 2020 - $57,457).

12. SHAREHOLDERS’ EQUITY

Authorized Capital

As at September 30, 2021 the Company had authorized unlimited number of common shares with a par value of €0.01.

Issued Capital

The Company has 135,743,459 (December 31, 2020 - 103,788,425) issued and fully paid shares.

Share capital

Share capital comprises the amount subscribed for at the par value.

Share premium

Share premium comprises the amount subscribed for share capital in excess of par value.

Shares issued

During the period ended September 30, 2021:

The Company issued 29,688,065 common shares for cash proceeds of $2,719,806 pursuant to the exercise of warrants.

The Company issued 2,229,682 common shares for cash proceeds of $155,564 pursuant to the exercise of agent’s compensation units and agent’s compensation options warrants; the Company reallocated $103,127 of warrant reserve to share capital and share premium in connection with the exercise of these agent’s compensation units.

The Company issued 37,287 common shares for cash proceeds of $2,059 pursuant to the exercise of stock options at the exercise price of $0.07 per common shares.

During the year ended December 31, 2020:

On July 15, 2020, the Company completed a non-brokered private placement of 46,766,666 units at a price of CAD $0.075 per Unit, for gross proceeds of CAD $3,507,500 ($2,586,270). Each unit consists of one common share and one non-transferable common share purchase warrant. Each common share purchase warrant is exercisable at a price of CAD $0.11 for a period of 24 months, until July 15, 2022. The Company determined that the fair value of the warrants issued was CAD $657,330 ($484,685). The fair value was determined by using Black-Scholes to perform an iterative calculation to allocate the actual proceeds received between the common shares and the warrants. The assumptions in the Black-Scholes pricing model used to calculate the fair value of the warrants were: an expected life of 1 years; annualized volatility of 103.68%; a risk free interest rate of 0.27%; and zero expected dividend yield. The Company paid finders fees of CAD $118,732 ($87,548) and issued 1,962,060 agent’s compensation option valued at CAD $147,155 ($108,523) as finder’s fees in connection with this private placement. The value of the agent’s compensation option was determined using the same unit price of the private placement. Each agent’s compensation option entitles the holder to purchase a unit at a price of CAD $0.075 per unit expiring July 15, 2022. Each unit related to the compensation option has features

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

consistent with the private placement. The Company incurred other share issuance costs of $34,962 on this private placement. Total transactions costs were $231,033 of which $187,736 were allocated to share premium and $43,297 were recognized through profit and loss.

On December 21, 2020, the Company completed a non-brokered private placement of 21,576,500 units at a price of CAD $0.20 per unit, for gross proceeds of CAD $4,315,300 ($3,356,134). Each unit consists of one common share and one-half of one transferable common share purchase warrant. Each whole share purchase warrant is exercisable at a price of CAD $0.30 for a period of 24 months, until December 21, 2022. The Company determined that the fair value of the warrants issued was CAD $786,742 ($611,872). The fair value was determined by using Black-Scholes to perform an iterative calculation to allocate the actual proceeds received between the common shares and the warrants. The assumptions in the Black-Scholes pricing model used to calculate the fair value of the warrants were: an expected life of 2 years; annualized volatility of 113.23%; a risk free interest rate of 0.23%; and zero expected dividend yield. The Company paid finders fees of CAD $84,205 ($65,489) and issued 240,950 agent's compensation options valued at CAD $48,190 ($37,479) as finder's fees in connection with this private placement. The value of the agent's compensation option was determined using the same unit price of the private placement. Each agent's compensation option entitles the holder to purchase a unit at a price of CAD $0.20 per unit expiring December 21, 2022. Each unit related to the compensation option has features consistent with the private placement. The Company incurred other share issuance costs of $54,729 on this private placement. Total transactions costs were $157,696 of which $128,946 were allocated to share premium and $28,750 were recognized through profit and loss.

Reserves - Stock options and warrants

Stock option and share purchase warrant transactions are summarized as follows:

	Warrants		Stock Options
	Number	Weighted Average Exercise Price	Number	Weighted Average Exercise Price
Outstanding January 1, 2020	-	CAD $ -	16,220,000	CAD$ 0.09
Expired	-	-	(1,600,303)	0.13
Granted	57,554,916	0.15	700,000	0.10
Exercised	(65,000)	0.11	(700,000)	0.07
Amendment, reduction in shares issued and outstanding (1)	-		(7,545,031)	0.09
Outstanding December 31, 2020	57,489,916	CAD$ 0.15	7,074,666	CAD$ 0.09
Granted	-	-	3,335,000	0.45
Expired / cancelled	-	-	(30,000)	0.45
Exercised	(29,688,065)	0.11	(37,287)	0.07
Outstanding September 30, 2021	27,801,851	CAD$ 0.18	10,342,379	CAD$ 0.21
Number currently exercisable	27,801,851	CAD$ 0.18	10,342,379	CAD$ 0.21

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

As at September 30, 2021 the following incentive stock options, share purchase warrants and agent’s compensation options were outstanding:

	Number of options and warrants outstanding		Exercise Price (CAD)	Expiry Date	Remaining Contractual Life (years)
Stock options	397,732		$ 0.44	May 17, 2022	0.63
	6,291,631		0.07	October 22, 2024	3.06
	348,016		0.10	June 2, 2025	3.67
	3,305,000		0.45	February 26, 2026	4.41
Warrants	17,680,101		0.11	July 15, 2022	0.79
	10,121,750		0.30	December 21, 2022	1.22
Agent’s compensation options	226,710	(1)	0.075	July 15, 2022	0.79
	195,026	(2)	0.20	December 21, 2022	1.22
Agent’s compensation options warrants	1,306,253	(3)	0.11	July 15, 2022	0.79
	3,650	(3)	0.30	December 21, 2022	1.22

(1) Each agent’s compensation units are exercisable into one unit at a price of CAD $0.075. Each unit comprises one common share and one share purchase warrant. Each share purchase warrant is exercisable into an additional common share at a price of CAD $0.11.
(2) Each agent’s compensation units are exercisable into one unit at a price of CAD $0.20. Each unit comprises one common share and one-half share purchase warrant. Each share purchase warrant is exercisable into an additional common share at a price of CAD $0.30.
(3) These are underlaying warrants issued upon exercise of the Agent’s compensation options

The Company has a stock option plan under which it is authorized to grant options to directors, employees and consultants to acquire up to 10% of the issued and outstanding common shares. The exercise price of each option is based on the market price of the Company's shares for a period preceding the date of grant. The options can be granted for a maximum term of 10 years and vest as determined by the board of directors.

In June 2020, the Company granted 700,000 options that vested immediately to an officer. The stock options are exercisable for a term of five years at an exercise price of CAD$ 0.10 per common share under the term of the Company’s stock option plan. Total share-based payments recognized in the statement of operations for the year ended December 31, 2020 was $49,266 for incentive options granted and vested.

In February 2021, the Company granted 3,335,000 options that vested immediately to directors, officers, employees, advisors, and consultants of the Company. The stock options are exercisable for a term of five years at an exercise price of CAD$ 0.45 per common share under the term of the Company’s stock option plan. Total share-based payments recognized in the statement of operations for the period ended September 30, 2021 was $600,824 for incentive options granted and vested.

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MERIDIAN MINING UK Societas
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in United States dollars)
(Unaudited)

The following weighted average assumptions were used for the Black-Scholes option-pricing model valuation of stock options granted during the period:

	Options granted in 2021	Options granted in 2020
Risk-free interest rate	0.88%	0.39%
Expected life of options	5 years	5 years
Expected annualized volatility	93.91%	175.84%
Dividend yield	0.0%	0.0%
Forfeiture rate	0.0%	0.0%

Warrants – Derivative Liability

The Company's detachable warrants related to the units issued in the July 15, 2020 and December 21, 2020 private placements have an exercise price denominated in foreign currency (Canadian dollars) and are classified and accounted for as a derivative liability at fair value with changes in fair value included in profit or loss.

On July 15, 2020, the Company issued 46,766,666 warrants and initially allocated $484,685 to the warrant derivative liability. On December 21, 2020, the Company issued 10,788,250 warrants and initially allocated $611,872 to the warrants derivative liability.

During the year ended December 31, 2020, there was a derivative loss of $3,940,613 from the mark-to-market measurement of the warrant derivative liability. The weighted average assumptions used in the Black-Scholes pricing model to calculate the fair value of the warrants were: an expected life of 1.00 year; annualized volatility of 93.69%; a risk free interest rate of 0.20%; and zero expected dividend yield.

During the period ended September 30, 2021, there was a derivative loss of $18,583,588 from the mark-to-market measurement of the warrant derivative liability. The weighted average assumptions used in the Black-Scholes pricing model to calculate the fair value of the warrants were: an expected life of 0.69 year; annualized volatility of 70.03%; a risk free interest rate of 0.53%; and zero expected dividend yield.

1. RELATED PARTIES

a) Key management compensation

	September 30, 2021	September 30, 2020
Salaries, consulting and directors' fees	$ 543,995	$ 381,427
Share-based payments	369,322	49,266
	$ 913,317	$ 430,693

b) Other related party transactions

As at September 30, 2021 the Company had the following balances due to/from entities related by way of common directors and/or management. These amounts, unless otherwise noted, were unsecured and non-interest bearing.

	September 30, 2021	December 31, 2020
Accounts payable and accrued liabilities	$ 118,729	$ 94,292

During the year ended December 31, 2020, the Company had debt transactions with SGRFIV and TSG that are disclosed in the Note 11.

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MERIDIAN MINING UK Societas
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in United States dollars)
(Unaudited)

1. COST OF SALES

	September 30, 2021	September 30, 2020
Inventory costs	$ -	$ 189,005
Royalties and taxes	-	60,433
Depreciation and depletion	-	-
Export costs and freight expenses	-	8,263
Total	$ -	$ 257,701

1. EXPLORATION AND EVALUATION EXPENSES

	September 30, 2021	September 30, 2020
Assays	$ 173,512	$ 411
Consulting – geological and other	319,245	55,274
Drilling	809,526	-
Equipment and maintenance	-	966
Fees and licenses	42,920	153,557
Field expenditures and road construction	226,197	3,739
Vehicle expenses	234,798	5,780
Other	121,993	5,778
Payroll	495,285	103,350
Survey	34,766	-
Room and boarding	83,201	4,508
Total	$ 2,541,443	$ 333,363

1. GENERAL AND ADMINISTRATION EXPENSES

	September 30, 2021	September 30, 2020
Consulting	$ 18,668	$ 82,683
Investor relations and shareholder communication	369,335	5,837
Insurance	85,859	85,210
Management and director fees (Note 13)	513,589	271,270
Office and miscellaneous	85,280	190,840
Payroll	106,827	167,044
Rent	11,426	50,237
Subscriptions and licenses	26,254	9,635
Telephone and information technology	41,117	55,658
Travel	41,119	13,188
Other	52,433	46,614
Total	$ 1,351,907	$ 978,216

1. CAPITAL MANAGEMENT

The capital structure of the Company consists of shareholders equity deficiency totalling $5,479,265 (2020 – equity of $3,224,019) comprising of share capital of $1,577,217 (December 31, 2020 - $1,184,781), share premium of $25,965,065 (December 31, 2020 - $12,021,458), reserves of $66,640,975 (December 31, 2020 - $66,427,924), and deficit totalling $99,932,522 (December 31, 2020 - $76,410,144). The Company's objectives when managing capital are to: (i) preserve capital, (ii) obtain the best available net return, and (iii) maintain liquidity.

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MERIDIAN MINING UK Societas
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in United States dollars)
(Unaudited)

The Company manages the capital structure and makes adjustments to it in light of changes in economic condition and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and investments.

The Company’s policy is to invest its excess cash in highly liquid, fully guaranteed, bank sponsored instruments. The Company is not subject to externally imposed capital requirements and does not have exposure to asset-backed commercial paper or similar products.

18. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

Financial instruments

The Company is required to disclose the fair value of each class of financial assets and liabilities in the financial statements. Financial assets and liabilities are classified in the fair value hierarchy according to the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect placement within the fair value hierarchy levels.

The hierarchy is as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quotes prices included in Level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The carrying value of receivables and advances, accounts payable and accrued liabilities, and loan payable approximates fair value due to the short-term nature of the financial instruments. Cash is carried at its fair value using level 1 inputs.

Risk management

The Company is exposed to various financial instrument risks and assesses the impact and likelihood of this exposure. These risks include, credit risk, currency risk, interest rate risk and liquidity risk. Where material, these risks are reviewed and monitored by the Board of Directors.

Credit risk

Financial instruments that potentially subject the Company to credit risk consist of cash and receivables. The Company deposits cash with high credit quality financial institutions as determined by rating agencies, Receivables and advances are mostly due from suppliers and contractors. Trade receivables are due from well-known customers, and the carrying amount of the financial assets represents the maximum credit exposure.

Currency risk

The international nature of the Company’s operations results in foreign exchange risk. The Company’s operating costs are primarily in US dollars, Canadian dollars, Brazilian reals and Euro, while revenues are received in either US dollars or Brazilian real. Hence, any fluctuation of the US dollar in relation to these currencies may affect the profitability of the Company and the value of the Company’s assets and liabilities.

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

The Company is exposed to foreign exchange risk through the following financial assets and liabilities denominated in currencies other than the function currency of the applicable company:

As at September 30, 2021	US dollar	Canadian dollar	Brazilian Real
Cash	$ 25,221	$ 2,589,816	$ 132,721
Prepaid expenses and other assets	83,669	13,336	69,552
Total Assets	108,890	2,603,152	202,273
Accounts payable and accrued liabilities	(286,399)	(22,092)	(562,780)
Net Assets	$ (177,509)	$ 2,581,060	$ (360,507)
As at December 31, 2020	US dollar	Canadian dollar	Brazilian real
---	---	---	---
Cash	$ 8,475	$ 4,411,747	$ 95,913
Prepaid expenses and other assets	108,857	18,515	31,736
Total Assets	117,332	4,430,262	127,649
Accounts payable and accrued liabilities	(482,329)	(251,404)	(192,297)
Net Assets	$ (364,997)	$ 4,178,858	$ (64,648)

Based on the above net exposures as at September 30, 2021, a 10% appreciation in the US dollar against the Brazilian Real would not result in a significant impact to the Company's earnings before taxes. A 10% appreciation in the Canadian dollar against the US dollar would result in an approximate $258,000 (December 31, 2020 - $433,026) decrease to the Company's earnings before income taxes. A 10% appreciation in the Brazilian Real against the US dollar would not result in a significant impact to the Company's earnings before income taxes.

The Company does not use derivative instruments to reduce its exposure to foreign currency risk nor has it entered into foreign exchange contracts to hedge against gains or losses from foreign exchange.

Interest rate risk

The Company's financial assets exposed to interest rate risk consist of cash balances. None of the Company's debt is subject to floating interest rates. The Company does not believe its interest rate risk is significant.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations associated with its financial liabilities.

The Company has historically relied upon capital contributions and related party debt financing and maintaining an adequate level of cash to satisfy its capital requirements and will continue to depend heavily upon these financing activities. All of the Company's accounts payable and accrued liabilities are subject to normal trade terms. The Company is exposed to risk that it will encounter difficulty in satisfying liabilities on maturity.

There can be no assurance that the Company will be able to obtain required financing in the future on acceptable terms. The Company will need additional capital in the future to finance ongoing exploration of its properties, such capital is expected to be derived from the completion of equity financings. The Company has limited financial resources, has minimal source of operating income and has no assurance that additional funding will be available to it for future exploration and development of its projects, although the Company has been successful in the past in financing its activities through the previously mentioned financing activities.

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MERIDIAN MINING UK Societas
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Expressed in United States dollars)
(Unaudited)

The ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions and the willingness of its parent company to continue to lend as well as exploration success. In recent years, the securities markets have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continual fluctuations in price will not occur. Any quoted market for the common shares may be subject to market trends generally, notwithstanding any potential success of the Company in creating revenue, cash flows or earnings.

The Company cannot estimate the extent of COVID-19 pandemic outbreak, and its potential impact on the ability to obtain financing and maintain necessary liquidity.

As at September 30, 2021, the Company’s liabilities that have contractual maturities are as follows:

	Less than 1 Year	1 - 3 Years	Total
Accounts payable and accrued liabilities	$ 871,271	$ -	$ 871,271
Taxes and fees payable (note 9)	1,451,371	111,636	1,563,007
Provisions	283,668	87,996	371,634
	$ 2,606,310	$ 199,602	$ 2,805,912

The fair value of the Company’s loans payable is approximated by the carrying values as the contractual interest rates are comparable to current market interest rates.

19. SEGMENTED INFORMATION

The Company operates in one operating segment, being the acquisition, exploration and development of exploration and evaluation properties in Brazil. Accordingly, the chief decision makers consider Meridian to currently have one segment and, therefore, segmented information is not presented.

20. COMMITMENTS AND CONTINGENCIES

A significant portion of the Company’s operations are located in Brazil. From time to time various legal, labour, environmental and tax matters are outstanding due to the nature of both current and historical operations. The Company has taken and continues to take all necessary and available steps to comply with relevant laws and regulations, however there is no assurance such steps will be successful.

Buffer Zone

The Company has been advised that due to certain Jaburi tenements being in close proximity to indigenous title land, Jaburi could be affected by a civil public action (“Ação Civil Pública”) between two Brazilian government departments, namely the Brazilian Federal Prosecutor’s Office (“FPO”) and ANM.

Jaburi currently owns several tenements, which border the Povo Cinta Larga indigenous land. Due to illegal diamond mining activities by nonrelated third parties within the Povo Cinta Larga indigenous land and surrounding areas (the so-called Roosevelt Reserve comprised of 2.7 million hectares, located in the south side of the State of Rondônia), in 2005 the FPO filed a civil public action against the ANM. The FPO is requesting the ANM to refrain from granting new mining authorizations and to withdraw all existing mining authorizations within the indigenous land of Povo Cinta Larga and surrounding 10km area adjacent to the indigenous land (“Buffer Zone”).

In 2008, the lower federal court Judge prevented mining companies from doing business in indigenous areas, except for the 10km Buffer Zone. This decision is favorable to Jaburi’s interests. The Buffer Zone concept is a result of Environmental Law discussions in Brazil. In 2013, the Federal Court of Appeals for the First Circuit (“TRF-1”) reviewed and amended the lower federal court decision to include the Buffer Zone within the indigenous areas. ANM filed appeals to overrule the TRF-1 decision, however, none of these appeals have yet been reviewed by the Superior Court of Justice

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

("Superior Tribunal de Justiça" or "STJ") and the Federal Supreme Court ("Supremo Tribunal Federal" or "STF").

On November 10, 2021, the Justice Luiz Fux, STF President, confirmed that the TRF-1 decision must prevail over this case. As a consequence, ANM is prohibited to granting new mining authorizations for areas located within the 10km Buffer Zone. Also, the effectiveness of any and all mining authorizations already granted by ANM in connection with the 10km Buffer Zone is suspended until the STF finally reviews the merits of the case.

If there is a final and non-appealable decision regarding the imposition of a 10km Buffer Zone, this would have a material impact on Jaburi's tenements as some of Jaburi's tenements straddle or are wholly within the proposed 10km Buffer Zone.

Jaburi has retained local Brazilian counsel to represent them in this issue who are following up closely the civil public action. At this point in time, management has determined it is more likely than not that there will be no amount owing, and therefore no liability has been accrued.

21. SUBSEQUENT EVENTS

a) Warrants and agent's compensation options warrants exercises

Subsequent to the period ended September 30, 2021, the following securities were exercised:

Securities exercised	Number of shares issued	Weighted Average Exercise Price in CAD	Gross proceeds in CAD
Warrants	2,164,500	$ 0.15	$ 316,470
Agent’s compensation options warrants	674,998	0.11	74,250
Total	2,839,498		$ 390,720

b) Mineral rights option agreements

On October 5, 2021, the Company entered into the second amendment to the Cabaçal Purchase Agreement (note 7) that changed the date of the second payment of $275,000 to October 15, 2021. The Company paid $275,000 to the Vendors on October 14, 2021.

On October 14, 2021, the Company also paid the $13,735 (75,000 Brazilian reals) related to the second payment of the Mirante da Serra manganese project option agreement (note 7).

c) Private placement

On October 19, 2021, the Company completed a brokered private placement of 14,835,000 common shares at a subscription price of CAD $0.70 per common Share, for aggregate gross proceeds of CAD $10,384,500.

d) Grant of stock options

On October 28, 2021, the Company granted 4,459,717 stock options to directors, officers, employees, consultants, and advisors that vested immediately with an exercise price of CAD$1.10 per common share for a term of five years, until October 27, 2026. There are total of 300,000 options within Grant are subject to certain vesting conditions.

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MERIDIAN MINING UK Societas

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Expressed in United States dollars)

(Unaudited)

22. RESTATEMENT OF WITHOLDING TAX OBLIGATIONS

During the year ended December 31, 2020, while determining the impact of settlements of the debt (Note 11) the Company concluded that a historical gross up of withholding taxes applicable under the debt agreements were previously not accrued. The Company has restated the comparative figures to correct the impact of applicable gross up of withholding taxes required to be accrued in prior years on the following loan facilities:

Gross up withholding taxes to be accrued	Period ended September 30, 2020
SGRFIV loan facilities	$ (43,559)
TSG loan facility	69,582
Total	$ 26,023

The Company has summarized the impact of this restatement in the summarized tables below.

Consolidated Statements of Loss and Other Comprehensive Loss	Period ended September 30, 2020
Finance expense, as previously reported	$ (537,077)
Adjustment	(26,023)
Finance expense, as restated	(563,100)
Total finance expense, as previously reported	(7,594,390)
Adjustment	(26,023)
Total finance expense, as restated	(7,620,413)
Other comprehensive loss, net of taxes, as previously reported	(11,426,610)
Adjustment	(26,023)
Other comprehensive loss, net of taxes, as restated	(11,452,633)
Basic and diluted loss per common share, as previously reported	(0.08)
Adjustment	-
Basic and diluted loss per common share, as restated	$ (0.08)
Consolidated Statements of Cash Flows	Period ended September 30, 2020
---	---
Loss for the period, as previously reported	$ (9,456,183)
Adjustment	(26,023)
Loss for the period, as restated	(9,482,206)
Taxes and fees payables, as previously reported	179,995
Adjustment	26,023
Taxes and fees payables, as restated	206,018
Net cash used in operating activities, as previously reported	1,473,190
Adjustment	-
Net cash used in operating activities, as restated	$ 1,473,190